Iran Forced to Reflag Oil Tankers

Javier Blas, Financial Times

Wednesday, 22 Aug 2012 | 2:51 AM ETFinancial Times

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Iran is trying to find new flags of convenience for its fleet of oil tankers after Tanzania and Tuvalu announced plans to deregister the vessels owned by Tehran, hitting Iran’s ambitions to use the tankers to supply its Asian oil clients.

Iran has over the past three months renamed and replaced the flags of more than half of its fleet of very large crude oil carriers – each capable of transporting roughly 2m barrels a day, equivalent to the daily consumption of France – in an apparent attempt to bypass US and European sanctions on its crude oil exports.

Iranian oil production has already fallen to a 22-year low of less than 3m barrels a day due to the combined impact of U.S. and EU sanctions, which aim to bring Iran to the negotiating table over its nuclear programme.

Tehran has dropped its own flag and those of Malta and Cyprus and instead has since July run the flags of Tanzania and the Pacific island-state of Tuvalu.

But both countries, under pressure from Washington and Brussels, have now announced they would deregister the vessels owned by NITC, formerly known as the National Iran Tanker Company, forcing Iran to look for a replacement. Under international law, vessels need to be registered – and flagged – by a country.

The Tuvalu Ship Registry this week said it had received an official notice from the government “to proceed with the deregistration of the NITC tankers and any possible Iranian-linked vessels” that are flagged under Tuvalu.

“We expect the deregistration process to be completed in the shortest time practicable to ensure the safety of the vessels,” the registry added.

Howard Berman, the top Democrat on the House foreign affairs committee, said the announcement by Tuvalu “effectively stops” some Iranian tankers from operating, “denying the Iranian regime oil revenues”.

“Iran is learning the hard way that we will not relent in applying crippling sanctions on the regime, and others are learning that evading international sanctionsis a losing strategy,” he said.

Tanzania announced similar measures earlier this month after Zanzibar said it had flagged up to 36 Iranian oil tankers. Seif Ali Iddi, Zanzibar’s vice-president, told lawmakers the country’s shipping registry was now “in the process of deregistering” the Iranian oil tankers.

Crude oil traders and shipping brokers said Iran would find it more difficult than in the past to find a flag of convenience due to growing international attention on the issue. Since Tanzania and Tuvalu registered the ships two months ago, Washington has included NITC on its list of Iranian sanctioned companies. In the worst case scenario, Tehran may need to flag its own colours, making it difficult for them to use their vessels.

The U.S. Treasury said the inclusion of NITC on the list “highlights Iran’s attempts to evade sanctions through the use of front companies, as well as its attempts to conceal its tanker fleet by repainting, reflagging or disabling GPS devices”. U.S. lawmakers, including several prominent senators, have urged President Barack Obama to sanction any country that provides a flag of convenience to Iran.

Iran urgently needs a replacement as it is using its tankers to ship crude to refiners in China, Japan, India and from next month South Korea. The refiners cannot use their own vessels or hire others in the market as European sanctions prevent them from buying insurance for any tanker carrying Iranian oil. London-based insurers provide roughly 95 per cent of the world’s maritime insurance.

NITC could not be contacted for comment. In the past the company has said it respects all international conventions and has never been named as subject to any sanctions by the UN, EU or the US. Hamid Behbahani, chief executive, wrote on NITC’s website that the company “emphasises its commitment to transparency”.